Vef Ab

Good morning from New York, everybody, and good afternoon to all our followers in European time zone. And welcome to our Q3 results conference call. I'm joined as always by our CIO, Alexis Koumoudos, and we'll spend the next 20 to 30 minutes running you through the highlights of the quarter as well as taking all the questions that you have. Moving on to slide two of the webcast and the slide deck that's available online. Key events of the quarter. I put four key events here, and these lie below Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab Ab you know, a nice level of AI led operational efficiency and it's becoming increasingly predictable. More moving from venture capital to private equity and then on that path towards public equity and an IPO. Point two, this is high level on a macro level. Clearly the Brazil election is in full swing. I left the news and noise around. We did have the first round a couple of weeks back with a very market friendly outcome. and the markets reacted very positively to a right-leaning government coming in from the current left-leaning government in place with the currency rallying, rates, forward curves dropping and underlying fintech equities and equities on large rallying. So there's fundamental and market-level positives behind these trends. The second round comes up this weekend. We'll get into that. Below the biggest holding portfolio, we like to highlight some of our smaller names or rising stars coming through, especially when they start to share more information. You know, Abbey, a company invested in five years ago, broke at $100 million of total of average run rate revenue mark, profitable, over $10 million in the UAE. And it's got an IPO process in the domestic Pakistani market, which is important for the company, which I'll double click on. And from a capital allocation point of view, it was really a quarter where we reached that milestone of paying back our bonds, very grateful to our bond investors for their support, and then put in place a revolving credit facility, which is much more suitable to our needs, better size, mechanics, et cetera. So a real positive step in the whole area of capital, capital allocation, and moving from pay down debt to buying back our shares. On slide three, just the numbers themselves, not much to talk about because it's a broadly flattish quarter on quarter. from a NAV, NAV per share in dollars and in local currency SEC. So I'll pass the mic to Alexis because there's a lot going on under the hood of that NAV for slides four and five around NAV movements and the portfolio companies involved. Alexis.

Thanks Dave. Hi everyone. Yeah, just double clicking a bit on the valuation approach that makes up Now essentially the split between mark valuations market latest transaction and mark model is relatively unchanged quarter-on-quarter 71% of the portfolio is marked with latest transaction 29% at mark model versus 1730 in the last quarter There's one methodology refinement that we've had in the quarter which is an Abbey which I'll come to in a little bit Our two largest holdings continue to carry the marks of recent and plausible transactions. That's Creditas, which is held at the $108 million Series G, closed in December, and JustPay at its $50 million Series D follow-on, which is closed in January, and priced at our secondary sale in that round. Both marks unchanged quarter-on-quarter both companies continue to deliver strongly post-race and We set sense check both against traded comps every quarter Within the master model book concierge was marked down further 5.1 million dollars two things drove that the peso which we can see 3% against the dollar of the quarter, and the continued multiple compression across rate-sensitive FinTech comps that drove the peer medians that we use to value Confio. But underneath, Confio continues to deliver in-line plan and is reigniting growth. So as in the first half, the markdown is a function of currency and comps. The rest of the mark-to-model book was mixed but net positive so far still edged down a bit With a multiple pressure and against that Nebo was marked up And Abby marked up as well both on strong delivery and I think the one methodology refinement highlight is that as Abby has crossed its $100 million ARR and is on its path to IPO-ing the profitable Pakistan business, we have moved the valuation methodology further down the income statement as we did with others. And that's like natural evolution of how we value businesses to incorporate a proper after-tax multiple alongside revenue multiple for Ab . And so that takes total marked model valuations reflecting a multiple below the revenue line, 10.90%. Moving on to slide five. Just to take you through the nav bridge for the quarter as they mentioned the headline for the quarter is that the Nav was down around one percent pretty flat quarter on quarter that was driven predominantly by good photo delivery, but offset by market moves and So as you can see on the detail on this slide, within the 29% of holdings valued at mark to model, the underlying portfolio performance added $10 million in the quarter. Against that, the multiple compression across our traded comps took $10 million off. with the pressure really concentrated in rate-sensitive fintech names. And FX took a further $3 million off on dollar strength in the quarter. So delivery, you know, fully absorbed by the comp pressure and currency really was the difference. For 71% of the holdings, I did the latest transaction with no new transactions in the quarter. These were held flat. At the corporate level, cash was reduced a million dollars, which is the ongoing off-ex and coupon payments in the quarter, with no new exit proceeds and the translation effect in the bond and our SEC liquidity balance is net to zero. So that gives us the net-net kind of flattish NAB in the quarter. Back to you, Dave.

Super. Thanks, Alexis. Yeah, like, well, it doesn't get too exciting at a NAV level, at least in the short term. I think what you'll see from the portfolio slides is that growth is compounding and that bodes well for NAV in the medium to longer term. At a high level, this is a slide we always share on the portfolio, you know, generally self-sustaining, which is what we want at this point in the cycle. It's gone from that early venture stage of burning and growing and getting market share to now in this more private equity, healthy growth, but self-sustaining phase. that growth is really picked up across the portfolio in getting into that 20 to 30% range across key metrics for biggest names. And they're out there raising capital. I, you know, in the next, the last 12 months, you've seen credit tasks and just pay a couple of others and smaller names. Um, but we expect more in the next six to 12 months when in the portfolio, because our portfolio is performing and that they'll throw in capital. And specifically, we always have to talk about credit tasks because it is important for everything we do at this stage. And these are the charts that we like to present. This reminds me of presenting charts for Tinkoff in the past and EasyCo, those gradual up into the right charts, which we all know, love, and want to be showing for our portfolio companies. But this is the ninth quarter in a row of sequential acceleration of growth from credit tasks. It's now a 26% portfolio growth, 30% year-on-year revenue growth. We are now starting to reach that steady state of 25%, 30% growth. I wouldn't extrapolate into the next 20 quarters. But this is something that the company promised. And quarter on quarter on quarter, they delivered. And it's been a joy for us to basically come out there and communicate that because it makes our life easy for our biggest holding and how well they're performing. As important below the top line of the business is the efficiency gains. We talked about credit tasks and AI and Sergio's and a couple of really cool podcasts on this that I recommend people listen to. But the headcount is disappearing significantly. as agents take the place of people across various lines of business from customer acquisition, customer service, and collections, et cetera. You know, AI into FinTech 1.0 companies is having a big impact on operational efficiency, and we're seeing it firsthand through the prism of credit tasks. These charts speak for themselves. I expect there's more legs in these charts versus the previous ones in terms of operational efficiency, leverage, and that path towards profitability and beyond. And it's a very exciting, not just top line credit tasks, but bottom line of credit tasks. And all of these things are keyed to formation of a company to get towards being a public company from a private company in due course. Bringing it back to macro level, we hate to get ahead of ourselves and we hate to focus on overly on macro. But, you know, our portfolio is a function of country level exposure and country level investor desire. Brazil is in a good place right now. It's election time, which means it's noisy, but the first round went towards the right, and the market reacted quite clearly as it seemed that Bolsonaro will take the presidency. The second round runoff is this weekend, and we will see clear caveat. But what the markets said to us was, you know, from a market reaction on equities, names are up 20% to 30% that are peers for our portfolio companies. The currency jumped 5%. Clearly, we've got a BRL portfolio. nearly 60% of our portfolio is exposed to Brazil credit us solve the seal Nebo and they will benefit directly lower rates better for growth as a quality margins stronger currency better for translation better comps you can extrapolate but you know it's very clear that the Brazil trade is something that's in focus and our portfolio is exposed to it with the caveat that second round is held this weekend and then below credit us You know, every quarter we like to grab a name to put out there front and center. Abbe's been very, especially when companies are sharing data, which is a private portfolio, Abbe's been sharing more and more for a variety of reasons. But the group ARR is now above $100 million. The regional in the United Arab Emirates is above $10 million from a standing start about 18 months ago. And these are numbers from a company that we invested in from a blank piece of paper, a million dollar investment, you know, five years ago into Omer Ansari and his team. As important and as exciting is that the local Pakistani business, which is a size part of the business, which is profitable and has a microfinance bank license, is IPOing or plans to IPO in the next weeks. And that's important for the domestic business, for domestic capital raising, domestic brand and customer, and for winning the Pakistani market. It's not a classic IPO at group level and cash out. It's within the group, but it's a major milestone and positive for Ab and thus for Beth. We had to choose Ab versus others. I could have easily put JustPay in this quarter. We're having a great run at the moment, especially on the international side, where international revenues are 20% now of overall revenue stream. So it's gone from nothing to 20%, and international is really working as it expands outside India. I could have talked about Compio, which in Q3 has really put the foot down in growth, and it's starting to come through on working capital and credit card volumes. We'll leave them for Q4 as we go. Moving away from the portfolio, I'm back to VEF, capital allocation, capital ideology. I think we've been very clear with our messaging to the market on this front over the last, I don't know, three, four quarters. And I'd like to think that we message and then deliver and it goes hand in hand. But we did pay down our bonds, the outstanding 300 million SEC of bonds in Q3. Very happy to do that. I'm very grateful to the Swedish bond markets, international bond markets, We have paid that down and replaced it with a revolving credit facility, a much more appropriate tool for this point in our cycle. It's obviously lower level of exposure. It's got better rates, 450 in bips spread over sidebar versus 650. It's a flexible drawdown structure, so flexibility, cost-efficient, lower rate. It's better in all aspects of what we do, and it's an indication of travel of where we've gone from requiring the bond markets to not requiring them, now having an evolving credit facility in place, which is better for us economically and from a business point of view. From a numbers point of view, we've got about pro forma liquidity of $11 million at this stage. Our net debt's about $4 million at this point. The facility's $15 million, and we'll work on that basis and manage that around exits and capital position and capital needs and as we go forward and in focus for all very much is the fact we trade at a discount and we do not like it we're very worried about shareholders in Beth and I think with what we're trying to do at Beth our portfolio performing incrementally quarter-and-quarter we communicate that we deliver exits at NAV the capital comes in we pay down our debt and then what do we do next we move on to our shares effectively it's the most obvious you know, investment company, one-on-one playbook, not that everybody does it, but you know, we have, not that you can do it all in one go. It takes time, but you do reap the rewards given everything we've seen from peers and over markets over time. And, but the exits have totaled over $50 million in the last 18 months to two years. Um, we believe we have more over the next 12 to 18 months. We've used that to pay down 300 million SEC, $30 million of debt. Now we're in a position where incremental exits and excess capital assets will be moved towards capital return, capital return being buybacks effectively for the market. So watch this space. We're not making any formal capital allocation frameworks or capital return frameworks at this stage. We will tie that to exit and capital in and the reality of the moment as opposed to theoretically in advance. And we just dropped in a slide on Georgia Capital. We are very aware of the investment company peers in Swedish market and international, both today and over time, because we're always looking for best in class and benchmarks to learn from, replicate and benefit from effectively. And Georgia Capital is a listed investment company in the UK, but it focuses on the Georgian market of Georgia and the former Soviet Union. And at the private equity fund effectively listed private equity fund folks on that market across multiple sectors. They've had a great run of taking their discount five or six years ago from over 60% to that 10% to 20% range. We're very close to that company. We've done sessions with them and their CEO. The feedback in the playbook is clear about what they've done, the similarities to us, and there's clearly key differences. But we take the learnings for what they are. They had a performing portfolio. They first paid down their debt. that excess capital in. They bought back their stock. They kept on having a clear message. They kept on delivering on that message. You know, some nuances and differences in that they have a big public listed company in their portfolio, something we would look to do in the future. It's been a performing asset as well, which clearly helps. But a lot of lessons from Georgia Capital and there's others which we'll bring to the table to show that, you know, we don't live in a vacuum. We're very open and aware of what works and doesn't work around the investment company world. And if anything, we're always going to be logical, process-driven as we look to build our NAB per share and close the discount to NAB. And then finally, just to close off on everything that we've said, it's always all about the portfolio. I say this a lot, but without a quality and performing portfolio, nothing else really matters. And our portfolio, we are very comfortable and confident in that portfolio today. The quality of it, the growth of it, and the fact that fresh capital is going to strengthen it and give it fresh valuation marks. The exits we talked about two years ago, it was empty promises and then we delivered. So now we've got traction, we've got market traction in that front. We believe we can do more. And then you start looking at what those exits can do for us. In the past, they have proven our NAV in theory in the market. They've allowed us to pay back our debt. Now looking ahead, they will allow us to buy back our shares and start to close that discount NAV and give a decent return for shareholders. And then we can move forward from there, talk about medium to longer term plans for BEF, but that's for another day. We will stop there, operator. I'm happy to open up for any questions that anybody has.